When should you start claiming your well-earned Social Security benefits? It seems like such a simple question – yet each year thousands upon thousands of words are written in magazines, published on websites, and uttered by financial advisers trying to persuade you that these so-called experts have the secret answer to that innocuous inquiry. Until we reach our 60s, most of us treat the question of when to start taking benefits as a sort of academic exercise. However, once we get past age 62 – and certainly as we approach full retirement age (between 66 and 67 for most of us) the pressure to decide seems to mount.
Recently we came across this article on the Barron’s website in which retired reporter Tom Wilk describes his own process of evaluating this important decision. For Wilk, as we’ll see, the choice of when to start Social Security comes down to three questions. Let’s take a look at what Wilk has to say.
Social Security Decision Sparks Debate
“Financial milestones come with growing older,” Wilk observes. He lists a few of the big ones. “Turning 59½ means penalty-free withdrawals can be taken from 401(k) accounts,” he writes. “Reaching 65 marks the arrival of Medicare eligibility. As of February 1, I reached another: full retirement age—66 and 2 months, in my case—for Social Security.”
Like many, Wilk has heard a lot of opinions. “I’ve held off claiming Social Security with some reservations, but it remains a lively topic of conversation with friends who were former co-workers,” he writes. He cites data from the Center for Retirement Research at Boston College, pointing out that about one-third of beneficiaries start receiving payments at the earliest possible age – 62 – while fully half of people take Social Security before reaching full retirement age. Fewer than 10 percent wait until 70 when benefits max out.
Friends Say “Take the Money Now!”
Wilk says his friends have been pushing him to start benefits immediately, now that he’s officially at full retirement age. “‘Get the money now. You’ll never make up the difference if you wait until you’re 70,’ advised a friend, who turned 70 in September and began taking it at 66.” Wilk says another friend, now 66, expressed similar sentiments. As she wrote to Wilk in an email, “I am about to apply for SS benefits since I’m of full retirement age. Decided not to wait until I’m 70 as the break-even point would not come until I am 82. Hardly seems like the biggest benefit is worth waiting for.”
Still another friend elected to start benefits just before turning 64. Part of the reasoning in his case, however, included a scary battle with cancer. “While the cancer wasn’t the primary reason for taking Social Security, he admitted ‘it’s in the back of your mind,’” said Wilk.
No Single Strategy Fits All Circumstances
“It’s evident that there isn’t a one-size-fits-all strategy for taking Social Security,” Wilk observes, and he’s right. Part of the consideration for him is that he and his wife don’t really need the money right now. “Financially, I can afford to wait as my wife, Elizabeth, and I are in good shape,” he says.
Wilk also points out another major consideration that his less-patient friends appear to have overlooked: waiting until 70 maximizes survivor benefits. When a beneficiary dies, his or her spouse begins receiving their benefit (assuming it was the larger of the two), a benefit that continues for life. Delaying your benefits until 70 maximizes the future benefit for your surviving spouse. “It’s a strategy our financial advisor has recommended,” Wilk writes.
“For me,” says Wilk, “the decision on when to claim Social Security comes down to three areas that all start with the letter H.” We’ve edited these into Three “H” Questions.
How’s Your Health?
“Except for Crohn’s disease, an ailment of the digestive tract that led to the loss of 45 pounds over 11 months as a teenager in my junior and senior year of high school, I have been in good health,” says Wilk. “Bouts with Crohn’s have led to three hospitalizations, including one where I had an intestinal bypass, between 1973 and 1980. Since then, I’ve managed to stay healthy, but that could change in an instant after a visit to a doctor.”
As one of his friends observed above, the age at which waiting until age 70 begins to pay off is about 82 or 83. If you realistically think you won’t live that long, taking earlier benefits could be a good strategy. Still, demographers point out that people are often pessimistic and tend to underestimate their own longevity. You may very well outlive your expectations.
How’s Your Heredity?
“My parents were a study in contrasts in terms of longevity,” says Wilk. “My dad died of a suspected heart attack at 41, two weeks before his 42nd birthday, in May 1965.” But his mom was a different story. “She went on to outlive him by just over half a century, dying in October 2015, five months after her 90th birthday.
For Wilk, the hereditary picture is murky at best. He observes – not very scientifically – that his folks “lived a combined 132 years, which averages out to 66, my current age. That has gotten me to consider taking Social Security.” (We’re not sure a geneticist would support that statistical analysis.)
Can You Cope with Human Nature?
Human nature may provide the biggest push of all to start benefits early. “Waiting to take Social Security is an exercise in delayed gratification,” Wilk writes. “Can you put off taking X amount of dollars a month now for the opportunity to receive a higher monthly amount down the road? It’s the adult version of the marshmallow experiment in which children are asked to delay eating a treat now for the chance to consume two later on.”
At things stand, Wilk concludes, he’s been willing to wait, “but also am keeping my options open.” Still, like many of us who are aging, he’s starting to observe the passing away of same-age peers. “After seeing an obituary for a 65-year-old high school classmate in mid-February, I realized all my planning could be for naught,” says Wilk. “He was at least the 15th person in my class of 130 to have died.”
So, after all that, what’s the conclusion? Wilk still hasn’t decided. “In the end, the future is unwritten and I’m left feeling like a character in a Shakespearean play,” he says. “To file or not to file early for Social Security? That is the question. The answer is to be determined.”
If you want to talk through the Social Security decision, contact us at AgingOptions. We’ll do our best to get you the answers you need to make the best possible decision for today and for tomorrow.
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(originally reported at www.barrons.com)